Brussels, 07/09/2012 (Agence Europe) - The details provided by the European Central bank yesterday about its 'Outright Monetary Transactions' (OMT) programme for buying up the sovereign debt of eurozone nations struggling to raise capital on the money markets has been greeted with a sigh of relief by many at the EU Council of Ministers, the European Commission and the European Parliament (see EUROPE 10683), most of whom called for further action to get the eurozone out of the economic doldrums.
At the EU Council of Ministers, it has been said that the ECB decision was recognition that the problems faced by countries like Spain and Italy were not solely due to problems with their own economies, but were also due to uncertainty about management and governance of the eurozone. It is hoped that details of the OMT would be enough to give the countries in question some breathing space. As things stand, Spain is less likely to have to make an official request for aid.
Euro Commissioner Olli Rehn said: “The Outright Monetary Transactions scheme should help restore investor confidence in the targeted sovereign bond markets while enhancing the functioning of the monetary transmission mechanism, within the ECB's primary mandate and in full independence.” Rehn went on: “The governments of vulnerable euro area Member States must continue to take determined action for sound public finances and sustainable growth and job creation. The pursuit of these policies will remain the responsibility of the governments concerned. The Commission stands ready to play its part in the enhanced surveillance of strict and effective conditionality.” A Commission spokesperson said the conditions attached to aid set by the eurozone summit were the same as the ECB's vision.
Speaking on behalf of the EPP party at the European Parliament, Joseph Daul and Jean-Paul Gauzès of France said: “This the right decision that goes in the direction of solidarity. We strongly encourage the ECB to follow up on today's decision and to firmly sanction any deviation from the proposed rules.” The two MEPs are eagerly awaiting publication of draft rules to give the European Commission ultimate control over supervision of eurozone banks.
Socialist MEPs lay the emphasis on growth stimulus measures. The President of the European Parliament, Martin Schulz of Germany, said: “The ECB decision must not be treated as panacea. Its implementation must be accompanied by an active strategy for growth and jobs as well as sound fiscal policies and structural reforms. I share the ECB's view that the euro is an irreversible project.” The president of the S&D party at the EP, Hannes Swoboda of Austria, commented: “I would wish that some politicians would demonstrate the same level of courage as Mario Draghi. The economic problems will not simply disappear with this decision. It is the task of European policy to take further steps, such as a banking licence for the European Stability Mechanism (ESM), a smart redemption fund (to manage excess eurozone debt for a period of 20 to 25 years, Ed.) and additional investment in the member states affected by the crisis.” He warned against the strings attached to ECB aid being excessively austerity-based.
The head of the liberals at the EP, Guy Verhofstadt of Belgium, commented: “ECB's bond-buying plan won't solve the crisis alone. After little more than two years, history is repeating itself without member states having understood that it is not up to the ECB to solve the crisis. Member states remain reluctant to make the much needed political jump towards a federal union, including a common bond market, which would have stopped the crisis and sheltered the euro.” Sharon Bowles (ADLE, UK), chair of the EP's Economic and Monetary Affairs Committee, said: “As expected, the ECB will buy short term bonds provided that there is accompanying pressure on politicians to maintain structural changes. I believe it is essential that such conditions are applied, not just for discipline but also because the actions taken by the ECB are not without cost.” She added that “one of the costs is not so much inflation of consumer prices but long-term lowering of returns to most pensioners and savers.”
On behalf of the Greens/EFA party, Philippe Lamberts of Belgium said the ECB decision made clear progress (unlimited purchase of bonds maturing in up to three years and dropping the ECB's senior bond-holder status), but it also underlined the inability of European heads of state to make the leap towards federalism that is so important for the well-being of European citizens. He criticised the ECB for attaching the same strings as for the current bailout (Greece, Ireland and Portugal), which are socially unfair and economically ineffective.
A dissenting voice, British Eurosceptic Marta Andreasen, said on Thursday: “The ECB will stop buying government bonds if the Members States fail to stick to their bailout conditions. Every economist worth their salt knows that Greece cannot stick to the bailout terms. Spain too is in great difficulties. In effect, bar some window dressing, the Eurozone crisis is in exactly the same shape it was in this morning: an unmitigated mess.” (MB/transl.fl)